Analysis of the real estate market in 2022 and forecasts for 2023.
Developments in home buying and selling
In 2023, the agenda of the sale and purchase market will be fixed on financing and will be at the centre of the sectoral, media and possibly political debate. The ECB’s interest rate hike, which has now risen three times in a row, the rapid rise in the Euribor, the cost of long-term bank financing in recent months and its impact on new and old mortgagors will have a decisive influence on the sector’s performance in the coming year.
For 2023, we estimate a drop in the volume of mortgage transactions for home purchases compared to this year, although we will probably continue to see a strong dynamism in the change from variable to fixed mortgages (via subrogation or cancellation and opening of a new loan), which will cushion the impact. And although the conditions of fixed mortgages have become much more expensive, mixed mortgages have burst onto the scene, with more advantageous conditions, which are gaining ground and we believe will continue to be one of the best alternatives for consumers in the coming year.
Where the change will be most noticeable is in the number of home sales and purchases that will close in 2023, where we are likely to see a reduction in the number of transactions at a national level and stagnation in the most dynamic markets. 2022 has been the best year in terms of sales and purchases since the bursting of the housing bubble and will end with more than 600,000 homes sold. In 2023 the sector will begin to return to the 500,000 homes sold per year.
The available supply of homes for sale on the market will stabilise, after falling by 7% in 2022. Buyers will once again have options to choose from. It will not be a homogeneous process and the areas with less demand will feel it sooner and more strongly.
Prices have not grown strongly in 2022. Although some cooling has been noted in the last few months in the major markets, they will end up positive in almost all of them. It seems unlikely that we will see widespread price falls in the major markets over the next few months; prices will probably cool down and take a stable path.
Rental market
Although the measures taken by the government seem to be aimed at containing rental prices, the factor that will mark the evolution of the rental market during 2023 will undoubtedly be the lack of available supply.
- The stock of rental housing has been steadily declining since the end of the pandemic. In the last year, supply has fallen by 25% in Spain, with higher percentages in the most dynamic markets. While demand continues to grow, the supply of housing is being drained without any replacement of the homes that end their contracts.
- The reasons for this lack of replacement are mainly to be found in insecurity. On the one hand, the difficulty in recovering housing quickly in the event of non-payment or occupation. On the other hand, the legal insecurity caused by all the measures taken or announced by the autonomous governments and the central government which, far from favouring the appearance of new product on the market, contribute to its disappearance: many owners, once their rental contracts have ended, decide to take their homes off the market and put them up for sale.
- The current economic uncertainty we are going through could delay in some way the decision making of potential tenants, which would prolong the permanence of properties on the market.
- The gradual tightening of supply has led to price pressures in the main markets. Without policies to encourage new product to come onto the market, prices could be set to rise further, making access to housing even more difficult for those most in need. However, the current price level combined with inflation undermines the affordability of tenants, which could freeze rental prices in some areas.
- The shortage of housing makes it more difficult for the most disadvantaged families and new groups without financial problems, but which offer less security to landlords, such as the self-employed or single people, to access housing. In many markets, ‘casting’ processes will be normalised.
- Rising prices have a direct effect on household incomes. The percentage of household income needed to pay rent increased in all provinces from 26.4% last year to 29.4% this year. A total of eight capitals require an effort of more than a third of the income to pay the rent.